Record-high primary income deficit hits Poland’s current account
Poland's current account deficit has widened significantly, reaching €2,216 million in June, which is substantially higher than both ING's estimate of €1,339 million and the consensus expectation of €679 million. This deterioration is chiefly attributed to a record-high primary income deficit of €4,444 million, stemming from seasonal dividend payments and earnings reinvestment by foreign enterprises, as noted in the full commentary from ING. The desk views this development as indicative of rising external vulnerabilities and potential pressure on the Polish zloty, particularly as the rolling 12-month current account deficit now accounts for 1.0% of GDP, up from 0.8% the previous month. This current situation may lead to increased scrutiny from investors regarding Poland's economic stability and currency valuation.
What the desk is arguing
The desk frames this as a significant development in Poland's economic landscape, with the current account deficit reflecting growing external pressures. Per the full note from ING, the primary income deficit surged partly due to seasonal factors, disrupting the usually more stable flows expected during this period.
The notable jump in the current account deficit, from €1,071 million in May to €2,216 million in June, serves as a warning signal. It highlights vulnerabilities created by high dependency on foreign investment and may raise doubts among investors about the sustainability of Poland's economic performance.
Where it sits in our coverage
Our consensus target for EUR/PLN remains at 1.075, with a range spanning from 1.04 to 1.12. Notable firm targets include:
This view is relatively aligned with the consensus, with jpmorgan projecting a slightly higher figure than the mid-point and bofa on the lower end of the spread.
How other firms see it
Several firms express concern regarding external imbalances in light of Poland's worsening current account. jpmorgan and others emphasize further scrutiny on the zloty, while bofa maintains a more cautious outlook.
Watch dynamics in the EUR/PLN, as trade flows coupled with monetary policy reactions from the National Bank of Poland may amplify volatility in this pair moving forward.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's current account deficit widened significantly to €2,216 million in June.
- 02Record-high primary income deficit of €4,444 million reflects foreign corporate influence.
- 03External vulnerabilities may pressure the zloty amid rising investment scrutiny.
Market implications
EUR/PLN is poised for potential fluctuations; watch for any shifts in investor sentiment toward Poland's economic fundamentals. Key levels to monitor include 1.05 and 1.10, as these may indicate changing market perceptions.
Risks to this view
A reversal in sentiment could occur if there is a robust recovery in the Polish economy or shifts in global investor appetite for risk. Moreover, favorable developments in trade balances could ease concerns and strengthen the zloty.
Articles Record-high primary income deficit hits Poland’s current account Published 14:34 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In June, Poland's current account deficit widened to €2216m (ING: €1339m; consensus: €679m), from €1071m in May. The positive aspect of today’s release is the record related to the balance on services. We estimate that the 12‑month rolling current account deficit increased to 1.0% of GDP, up from 0.8% of GDP in the previous month Michal Rubaszek Poland's current account balance in June widened, mainly due to the record-high primary income deficit The current account deficit widened in June due to a one-off event In June, the current account deficit widened to €2216m (ING: €1339m; consensus: €679m), from €1071m in May and a deficit of €445m in June of last year.
We estimate that the 12‑month rolling current account deficit increased to 1.0% of GDP, up from 0.8% of GDP in the previous month. The main source of the surprise is the record-high primary income deficit of €4444m, which is significantly above last month’s outcome (€3160m) and the previous record from June last year (€3998m), and which largely reflects seasonal dividend payments and the reinvestment of earnings by foreign-owned enterprises. The trade balance deficit amounted to €1469m, slightly higher than in May (€1182m), amid exceptionally strong trade flows.
Export values in EUR increased by 12.3% year-on-year (consensus: 8.0%), while imports rose by 16.9% (consensus: 9.4%). Such strong growth reflected higher transaction prices, the recovery in global trade, and calendar effects. For imports, an additional factor may have been the acceleration of investment projects related to the implementation of the Recovery and Resilience Facility.
National Bank of Poland (NBP) comments indicate that high foreign trade dynamics are driven primarily by capital and intermediate goods. It is also worth noting that, according to the NBP, the increase in global energy commodity prices is a significant contributor to the widening of the trade deficit. The positive aspect of today’s release is the second record related to the balance on services.
The surplus reached €3900m, compared with €3379m in May and the previous record of €3872m set in June 2022. Finally, the secondary income balance recorded a relatively small deficit of €203m, compared with €108m in May. In our view, the June current account deficit should be seen more as a one-off event than as the beginning of a persistent trend.
Poland remains in a position of external balance, despite the deterioration in the terms of trade, which is related to rising commodity prices, and the appreciation of the real effective exchange rate of the zloty over recent years. Balance of payments' developments do not constitute a significant source of depreciation pressure on the Polish zloty. The PLN is currently driven primarily by global risk sentiment and the outlook for NBP monetary policy relative to that of other central banks.
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